JP: Bank of Japan Announcement

Tue Oct 06 22:00:00 CDT 2015

Consensus

Actual

Previous

Change

0bp

0bp

0bp

Level

0-0.1%

1-0.1%

0-0.1%

Highlights
As expected, the Bank of Japan left its key interest rate range at zero to 0.1 percent. It said it would continue to buy JGBs at an annual pace of ¥80 trillion. The vote to maintain its policy was 8 to 1. Once again, Takahide Kiuchi voted against the decision arguing that a reduced pace of purchases (¥45 trillion) was appropriate.

In its statement, the monetary policy board said that the economy continued to recover moderately and was likely to continue doing so. The MPB said that the core CPI was likely to continue to be about zero for now due to the decline in energy prices. However, both exports and output have been affected by the slowdown in the emerging markets. It noted that private consumption has been resilient but capex remains weak.

Core consumer prices in July were down 0.1 percent on the year the headline consumer price index rose just 0.2 percent from a year earlier. The BoJ is scheduled to release a new outlook on the economy and inflation on October 30, when many economists believe it will take further action.

Definition
The Bank of Japan is the central bank of Japan. The monetary policy board reviews economic conditions at home and abroad before making a policy decision. The decision is announced at the conclusion of its meeting. There is no specific time for the announcement.

Description
The Bank of Japan Policy Board meets once a month for two days to discuss economic developments inside and outside of the country. The culmination of the meeting is the announcement of any adjustments to interest rates or other aspects of monetary policy. Like other central banks, the BoJ's goal is to ensure price stability while taking into account economic growth, employment and recommendations from the elected government while maintaining its independence. Unlike other central banks, the BoJ does not have an inflation target and has been engaged in fighting deflation. And while prices have risen thanks to soaring energy prices, these increases look fragile going forward.

The Bank announces its conclusions in a statement issued at the close of the monetary policy board meeting. The meetings are generally followed by a press conference by the Bank's governor. Needless to say, his comments are parsed carefully by the financial markets. In addition, the BoJ publishes minutes of the meeting about a month or so after the meeting but give detailed insight into the Bank of Japan's monetary policy decision making process. Every month the Bank releases a report covering trends in the Japanese economy and relevant international developments. The report summarizes recent economic indicators and gives the Bank's official position on Japanese economic growth. Because the BoJ sets monetary policy, any insight into the conclusions and assumptions the Bank is operating under can be helpful in predicting future interest rate actions.

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